Eurobank: High prices are expected to remain in the first half of 2022

The appearance of the new coronavirus mutation COVID-19, known as the “omicron” mutation, together with the ongoing 4th wave of the pandemic, remind us that the uncertainty that accompanies the health crisis remains, points out in its weekly bulletin “7 Days Economy” Eurobank.

Undoubtedly, the uncertainty does not have the same intensity as 22 months ago when the first case was recorded in Greece. Disease-fighting supplies have increased (eg vaccine and medication), as has the knowledge of the economy about how to trade under a pandemic (eg e-commerce, teleworking, digitization of public administration, etc.). .a.).

However, the fatigue of households, from an economic-psychological point of view, is obvious and justified, especially in Greece, where the health crisis was preceded by a decade of intense economic and social upheaval. A period of necessary adjustment but also of deep recession. 14 years have passed since the end of 2007 until today, with short breaks of calm and strong expectations. Of all the confidence indicators that compose the economic climate index constructed by IOBE, the consumer confidence index shows the largest negative deviation compared to pre-pandemic levels.

In addition to the developments on the pandemic front, the recent announcement of the European Statistical Office (Eurostat) on the course of the general price level in November 2021, confirmed the concerns about accelerating inflation in Greece and the rest of the Eurozone countries. Analytically, the annual rate of change of the HICP is estimated at 4.3% in November 2021 (4.9% in the Eurozone) from 2.8% in October 2021 (4.1% in the Eurozone).

To these results is added the announcement of the semi-annual report of the Organization for Economic Cooperation and Development (OECD Economic Outlook), according to which inflation in Greece is projected at 3.1% and 1.5% in 2022 and 2023 respectively. The estimate for 2022 is much higher compared to the corresponding forecasts in the 2022 budget report (0.8%) and the European Commission’s autumn forecasts (1.0%).

The rise in inflation in Greece from June 2021 is linked, among other factors, to baseline results, due to the negative prices it received in the previous period, especially in the 2nd half of 2020 and the 1st quarter of 2021. Specifically, the HICP in Greece in October 2021, although it was higher by 2.8% compared to October 2020, however compared to October 2019, ie over a period of 2 years, the aid was only 0.7%. In the coming months, the phenomenon is expected to peak, maintaining relatively high prices in the first half of 2022 (mainly in the first quarter of 2022) and then a gradual de-escalation. The scenario of declining inflation in the Eurozone, during the months of 2022, is supported by the European Central Bank (according to statements by the President).

Given the two above risks for the performance of the economy in the next period, on Monday, December 6, 2021, the announcement of ELSTAT for the national accounts of the 3rd quarter of 2021 is expected. , sales in trade and the economic climate, strengthens our initial position, as presented in issue 395 of the bulletin 7 Days Economy (November 5, 2021), for the continuation of the recovery in the 3rd quarter 2021, albeit at a slower pace.

Analytically, the industrial production index strengthened at a rate of 1.1% QoQ / 9.1% YoY from 1.4% QoQ / 14.8% YoY in the previous quarter. At the same time, the degree of factory capacity utilization in industry increased to 78.6% from 75.0% in the second quarter of 2021. This performance can be linked to the strengthening of exports of goods and the recovery of tourism in the period July-September 2021. In trade, the wholesale turnover index strengthened on a quarterly basis for the 5th quarter in a row (2.9% QoQ / 22.0% YoY from 4.8% QoQ / 30.2% YoY in the 2nd quarter 2021), while in Retail sales at constant prices were kept, albeit marginally, at the levels of the second quarter of 2021. Nevertheless, on an annual basis, they were higher by 8.8%.

Similar quality characteristics were recorded in car sales, with an increase of 0.5% QoQ / 11.9% YoY from 2.7% QoQ / 83.6% YoY in the second quarter of 2021. The increase in car sales is to some extent related to creating incentives to replace public transport with private vehicles for pandemic protection. The result is reflected daily in the streets of the capital, with the traffic problem showing a particular exacerbation from the 2nd half of 2021.

Finally, the opening of the economy and the better-than-expected tourist season led to an increase in employment for the second consecutive quarter by 4.3% QoQ from 5.8% QoQ in the second quarter of 2021. The number of employed, the number of unemployed and the Unemployment rate, after the sharp fluctuations during the closing-opening months of the economy, from April 2021 are moving dynamically up and down respectively, as a result of which they return to the pre-pandemic trend paths. In September 2021, the unemployment rate was 13.0% of the workforce from 16.8% in September 2019, employment increased by 4.2% or 164.9 thousand people compared to September 2019 and unemployment decreased by 22.9% or 181.5 thousand people compared to September 2019. Seasonal factors, but primarily the withdrawal of support measures, will include an adjustment-transition cost, especially from November 2021 onwards, for the domestic labor market.

In addition to the production, sales and employment indicators, the economic situation, such as the manufacturing PMI and the economic climate index, also improved in the third quarter of 2021. The first, in terms of an average of 3 months, remained above the limit of 50 units for the 3rd quarter in a row (> 50 improvement of operating conditions,

Based on the above data, we conclude that the recovery of the Greek economy continued in the 3rd quarter of 2021. Most high-frequency indices, with the exception of the consumer confidence index, moved upwards, albeit at a slower pace. Factors that may have restrained the projected recovery are, 1st, the possible reduction in the change in inventories due to the high accumulation of the previous quarters, 2nd, the revisions of the results of the previous quarters and 3rd, the effect of the seasonal adjustment of the series, on the export contribution; namely tourism in GDP on a quarterly basis.